Without intervention, Digital India looks to simply be a colony of US and China.
Last year, Prime Minister Narendra Modi announced Digital India and Startup India, to declare India's impending digital eco nomy and local entrepreneurship ecosystem. Today , it looks as though India's ability to build a local digital economy may be failing.
Companies such as Flipkart, Snapdeal and Ola which saw strong growth in the last few years, are faltering today at the hands of intense competition with deep pockets from Amazon and Uber, which are able to deploy cash and technology from the US into India. Similarly ,
India's digital advertising economy is dominated by Google and Facebook, which would jointly capture more than 75% of all digital advertising revenues. Whilst many investors were excited at Digital India's arrival, many are now walking away , viewing India simply as a digital colony of global digital businesses like Amazon and Alibaba. This is leaving India's largest digital success stories in precarious positions. The likely outcome is that they will not be able to compete with global balance sheets.
Government has rightfully been liberalising the Indian economy across many sectors but without a different approach for digital, the open route in the nascent digital sector may destroy local entrepreneurship just as it is starting.
Lessons can be drawn by comparing Europe and China today . Europe is effectively an extension of America's digital economy , whereas China nurtured the development of local digital businesses by giving them time to build capabilities before global companies could enter. China's digital economy will drive 21% of its GDP growth for the next ten years, driven by the fact that its digital economy is indigenous and has employed and developed lakhs of highly skilled digital technology talent many from rural China. Baidu and Tencent (the Google and Facebook of China) which are two of hundreds of large internet companies in China employ nearly 75,000 locals. Meanwhile, Europe struggles to develop real centres of innovation in technology that can compete.
Similarly , Google and Facebook's India teams employ only a few hundred people here, primarily to promote their products built by thousands of engineers in California. If India had a local digital economy comparable to China, it could be the next driver of global growth, after the IT industry boom of the 1990s.
India is the top priority for global internet companies to extend their businesses here but government must urgently evaluate whether this is really in the nation's interests.
Should India's internet economy be an extension of the US and China's large companies or should it be a local economic driver of its own? If it prefers the latter, government must implement policies that enable and nurture local digital talent to have a level playing field with global behemoths.
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